Sunday, 25 February 2018

Killer Arguments Against LVT, Not (436)

What is particularly irritating about all these KLNs is that they are not based on facts or reason, even though the Homeys pretend they are. Even if you could sit Homeys down and carefully rebut their objections, they wouldn't say, ah well, good point, I suppose my KLN is baseless. They will just invent another one and would have no qualms about completely contradicting themselves (as the commenters do below).

Emailed in by MBK from The Times, from the comments to an article headed John McDonnell says Labour backs levy on land to replace council tax:

GK: They really are flying the Marxist flags high this week. Will WC 19th February 2018 go down as the week the Socialist Party finally unveiled their true intentions?

John McD clearly said that it would be a replacement tax. One in, one out. Maybe Labour intend to collect more from LVT than they would have done from Council Tax, so what? How is that more "Marxist" than the Tories regularly nudging up the main rate of VAT, something which a Labour government (to its credit) has never done?

Another cyclist: The fairest form of local taxation was the Community Charge - every person who used council services paid for them. Why should two people living in a large house pay more than two people in a small house? Both use the same council services.

A Poll Tax is inherently regressive and difficult to collect, so 'honest' souls would end up overpaying to compensate for those who wriggle out of it. For a given total revenue, the average household would be paying as much in Poll Tax as they would be paying in LVT. The big differences being that LVT is inherently progressive, easy to collect and encourages more efficient use of land and buildings.

Christopher Sheldrake: I have a large garden, it's actually large enough to build a second house on. This was obviously what was originally intended because there is a missing number between us and one of our neighbours.

However, there is zero chance of the council agreeing to give us planning permission to build another house (They even refused a detached garage because they thought the intention was to turn it into a house - it wasn't). So, can McDonnell please tell me how we are supposed to make our garden more "productive" to avoid Labour's squalid Land tax ? The answer is we can't, the council won't let us...


That's a valuation issue, clearly, the valuation system has to be consistent with the basic concept of 'optimum permitted use'. If there's no planning for a second home, then the extra large garden would only incur minimal tax. Observation tells us that people value the first 100 sq yards of back garden or the first one or two off-street parking spaces very highly. The additional price/rent that most people are prepared to pay for anything more than that is minimal (diminishing returns to scale), so the extra tax on the would also be minimal.

... This is nothing more than a tax grab which will, quite by coincidence, of course, not hit Labour Lovies [sic] in Islington with their small gardens, nor their supporters living in council or Housing Association flats.

Bollocks. The LVT on homes in Islington will be very high. how high the LVT-inclusive rents for social housing would be is - and always was - a political decision.

colinus: That's the London vote gone. Carry on McD.

Wahey! That's the equal and opposite argument! He recognises that LVT on homes in London will be a lot higher than Council Tax. Caveat One - it's set at a national rate, which is not clear from the article. Caveat 2 - over half of people in London are tenants and won't be affected.

Toby Jones: What is the difference between taxing land and taxing property? Does it mean that a tumbled down property on a valuable piece of land is presented with a large bill...

Yes, obviously.

... but a central London luxury Penthouse has low tax on the basis that it sits on land along with 35 other flats and they all share the land bill..?

Nope, 80% or 90% of the value of a London luxury Penthouse worth £1 million is land/location value, so it would pay very high LVT. The value of inner-London land is so stupendously high, you can divide it by 36 and still have a very high land value per unit. That's why a pokey flat in outer London costs the same as a normal family home in the suburbs of most other British towns - and would have a similar LVT bill.

Why would you take land values as the basis when the value of the property is 1) more able to be estimated and 2) A more accurate sign of ability to pay.

Because land value is the best measure of benefits received from society in general and/or burden placed by the occupant on society in general; the land/location value of housing is far easier to calculate; and taxing land/location value encourages improvements rather than discouraging them. Pure land value has nothing to do with "ability to pay" of any particular individual household but a) neither does total building/land value and b) they are both good indicators of "willingness to pay" of all households in the area.

drunk and disorderly Brexiter: I tried to have this explained to me by advocates but their answers ranged from outrageous to stupid.

I asked what an elderly person living in a large house should do if they can't afford the LVT based on the value of their property. Considering they probably bought the house when it was worth far less and its current value was completely out of their control...


Roll up and defer, that's what most LVTers say. If the value is completely out of their control, then that's a bit of a clue bat that the gain is entirely unearned. See the equal and opposite KLN: "I have worked hard to improve my home and shouldn't be taxed on my own efforts". Er, income tax?

Apparently that person should sell and buy something smaller...

If they don't want to roll up and defer, can either buy something smaller in the same area, or something the same size in a cheaper area, or indeed something much larger in a much cheaper area.

So - ignore the nastiness of uprooting someone against their will for the moment - I then asked what it would do to property prices for first time buyers if elderly people kept buying up small homes. The response to that was silence.

The price of the sort of homes that young couples would like to buy - family homes - will clearly fall, as there will be more of them on the market. That also saves them the hassle of moving again in a few years if/when they have kids, win-win.

20 comments:

jack ketch said...

Speaking as a member of the Economic Laity, LVT sounds so much like a quick, easy to administer, fair and above 'workable' solution to the perennial bugbear of Local Authority finance I am surprised that we don't already have it. Surely the reticence can't solely be due to the Billy Jo Bob's "Elvis Lives" Divine Snake Handling Church Of HomeOwning ?

Shiney said...

Mark

"How is that more "Marxist" than the Tories regularly nudging up the main rate of VAT, something which a Labour government (to its credit) has never done?"

I thought..... "hang on a minute that can't be right"..... which it isn't 'cos Darling raised it from 15% to 17.5% reversing the cut of two years earlier. But I guess you would argue he was just restoring the rate to the long run 17.5% rate.

Shiney said...

@JK

Its never been done because its an 'in yer face' tax... you can't obfuscate, evade or generally hide from paying it and the amount you have to pay is clear and transparent. Plus you have a choice over the amount you pay because you can adjust the amount of land (location) value you 'consume'.

So if all other taxes were replaced by LVT people would whinge and moan about paying it and therefore would want the size of govt cut PDQ (this is a feature, not a Bug).

Thus TPTB are solidly against LVT and allow the 'useful-idiot' Homeys to do their dirty work for them.

Mark Wadsworth said...

JK, LVT is not just about the arbitrary category of "local government finance", think about it, isn't the bulk of all govt expenditure "local" to somewhere or other? Local taxes tend to be regressive, so a purely "local" LVT would largely defeat the object, must be national (like SDLT or Business Rates).

Sh, they announced it as a temporary cut for 13 months and then put it back up again. I don't count that as an increase.

Agreed, in-your-face taxes mean that there'll be pressure on govt to get value for money (= lower LVT and/or higher UBI), must be a good thing.

Remember also that people
a) like showing off how much they earn but it's consdered rude to simply say how much, so they have to do conspicuous consumption.
b) people love moaning how much tax they have to pay

So LVT is the perfect tax. It captures a lot of the money that would have gone into conspicuous consumption AND by moaning how much they pay, people can indirectly boast about how much they earn.

jack ketch said...

MW, yes I can see the sense in that.

DBC Reed said...

Looking on the bright side of things, we have got somebody pledging LVT who may be in power shortly (if Corbyn hooks up with the Tory mutineers).If the mutineers cut up rough about LVT,the Tory "leadership" will have to come up with a homey friendly alternative which will be a fiasco (within a fiasco).(As the mutineers are what's left of the real Tory Party after its "leadership" turned the party into UKIP Plus for the last election, there will be a surreal stand-off for who has rights to call themselves Tory and chuck the others out.God!This is enjoyable.)

mombers said...

Would be interesting to see how some of these KLNs will fly in an election now that very clear evidence of naff all ability to pass on taxes to tenants has been demonstrated with Section 24. Given that fewer than half of adults are homeowners, especially those of working age, some fairly solid arguments will hopefully be made...

Shiney said...

I do believe @DBCR is having a (Tory) 'wet' dream ;-D

Mate... when the Corbynistas realise what LVT really entails (i.e. smaller and more accountable government) you'll see them turning off the idea PDQ.

Mike W said...

Shiney, LVT is much like MMT, it simply describes (predicts) what will happen as you shift from all the old distorting taxes to LVT. How far you go, and who gets what, can be debated among the Liberal/ Georgist/ Labour parties of the future (or as you honourably believe, the Tories). You know all this anyway :)

You may be interested to consider that LVT is in the DNA of the Labour Party. It is just returning to a lost Georgist root. For example, on Andrew Maclaren, who penned the 1929 Labour Manifesto, G Lee says he was against, 'nationalisation of the land' but rather as the Manifesto said to, 'secure for the community the increased value of land which is created by industry and the expenditure of public money'.

Unfortunately, Lee then points out Snowden did not in fact put LVT in his first budget:'in spite of a petition at the end of 1929 signed by 165 Labour and Liberal MPs.' There had been a high of 138 Labour MP's for LVT in 1923.

So let's all hope Corbyn and co know how LVT was buried by 1931 last time, and continue on the 'Council Tax Up' route IMHO. For The Many and Not the Few - Great Labour LVT Manifesto's, 1929 and 2017 :)

Mark Wadsworth said...

M, do not underestimate the mental agility of the Homeys.

Let's assume they accept evidence that LVT cannot be passed on. That leads to Bad Outcomes:
- falling prices, ensuing financial apocalypse and destruction of savings and wealth.
- BTL landlords "forced" to sell -> all tenants become homeless.
- PWIMs 'forced' to downsize, meaning no small homes for first time buyers
- no new construction but simultaneously, farmers 'forced' to sell off fields for development

Remains to be seen whether the majority priced out adults (and their parents) cotton on to this and all join/vote for YPP.

DBC/Sh/MW, I remain eternally optimistic, even if it's only Labour proposing it.


Shiney said...

@MW and @MWthesecond

Eventually "the Borg" that is the Tory party will assume the position (i.e. LVT is 'a good thing') - remember their only reason for being is to be in power.... principles.... fuck principles ;-D

Bayard said...

"The price of the sort of homes that young couples would like to buy - family homes - will clearly fall, as there will be more of them on the market."

Er no, we've done this one to death. Increased supply has been shown not to have any effect on price except to increase it. What will bring prices down is increasing the cost of ownership.

Physiocrat said...

As the proportion of renters grows, the constituency for LVT will grow to the point that it will no longer even be perceived as an electoral liability.

It is a very bad idea to live in a large house much beyond the age of 70. By the time you realise you can no longer cope, you cannot cope with a move. I watched this happen over and over again in the street where I used to live.

The trouble is that in England, most flats have rotten leases and tend to be poorly insulated and many are bad conversions from large houses.

Mark Wadsworth said...

B, you're getting ahead of yourself.

I saw a KLN recently "LVT will force the PWIMs to downsize, meaning more demand for small homes, meaning that the price of starter homes for FTBs will go up, making life more difficult for FTBs".

In relative terms, the price of family homes - the sort of things that FTBs would like to buy - will fall. I don't see how you can argue with that.

Ph, true, the UK is not very good at building or managing blocks of flats.

Bayard said...

"LVT will force the PWIMs to downsize, meaning more demand for small homes, meaning that the price of starter homes for FTBs will go up, making life more difficult for FTBs".

Apart from the fact that the PWIM is a mythical beast and no more exists than the unicorn, it could be true that lots of downsizing old people entering the market would push up the cost of the sort of houses and flats that they would like to downsize to, given their greater buying power, all that lovely lolly from selling their mansions. However, there is no guarantee that they would be competing with FTBs in that they would probably not be looking to buy the same sort of house/flat as an FTB. "Second-steppers", perhaps, but they don't have quite the same shroud-waving value as FTBs.

Mark Wadsworth said...

B, KLNs are best dealt with by accepting as much of the underlying assumptions as possible. According to the Homeys, about a third of the population are PWIMs and there's no point arguing with them.

Bayard said...

Well, I suppose if you stretch the definitions of "poor" to mean "not a millionaire", mansion to mean "any house worth more than half a million" and "widow" to mean "any single person over 50", then you might catch a few in the net.

Mark Wadsworth said...

B, no, PWIM is anybody over 50 who owns anything at all who is not earning at least £50,000 a year :-)

Clearly, only a very wealthy few will be able to afford the LVT. The rest will become homeless and those who can afford will flee abroad to avoid it.

Bayard said...

Aha, so I am officially a PWIM. Perhaps I shall have a badge made or start a society, or something.

Mark Wadsworth said...

B, indeed, if you live alone then you can also subscribe to the KLN "As a single adult, I only use a fraction as much local services as the large family next door so I should pay less. Surely a Poll Tax is a much fairer way of making people contribute to the cost of local services?"